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As Long as We Remember...

November 23, 2009

Of Double-Dips and Bubbles

Steven R. Berryman

The corollary of President Franklin Delano Roosevelt’s famous “We have nothing to fear but fear itself” is that economically, it’s the “not knowing” that can damage us even worse than a specific negative indicator of our progress in recovery.


Old indicators like the “misery index,” formed by adding unemployment rate to inflation rate, just don’t work this unique time of our present Great Recession. Thus far inflation has been kept in check by fear from consumers, who are responding to the unknowns by clutching their wallets, and even saving up part of their incomes.


Imagine that?


Perhaps the new misery formula could be: unemployment + pent up inflationary potential + loss of our faith that government is focusing on jobs primarily!


Retailers “get” our circumstances, and are predicting a down Christmas shopping season and will respond accordingly, so expect deals. That’s the good news.


Traders in gold in all of its forms are having a field day playing off of those same fears; last week there was also a planted story about a gold shortage….right. That’s the disinformation!


The stock market gleams again, like a bar of gold with the promise of increases beyond the purely psychological Dow 10,000 mark. This despite raging unemployment rates, policy quagmire in Afghanistan, and the unknowables of pending healthcare reform legislation. This is the new bubble!


The American people have rightly come to the conclusion that they are being manipulated by forces beyond their control, for purposes that are not fairly conveyed as explanation.


President Barack Obama’s own personal “misery index” has been ratcheted up via both houses of Congress. However faithfully the president has been fulfilling campaign promises, it has not materialized in jobs. The preoccupation with one’s own job security has now become the most important element in the new fear factor.


Maryland Comptroller Peter Franchot has been busy recalculating the impact of lower tax revenues on budget, and Gov. Martin O’Malley has been conducting damage control.


Randy McClement, mayor-elect of the City of Frederick, has already – preemptively – busied himself and his transition team on line-by-line scrutiny of his budget, seeking any advantage possible.


We may have our very first ever “nice guy Mayor McScrooge!”


The combination of revenue shortfalls and absent federal stimulus funds already spent this year will result in across-the-board layoffs to include all typically untouchable positions in state and local governments.


We don’t know the who, where, and when of it – adding to the broader fears of uncertainty – but teachers, law enforcement, public works, fire and safety, and even health services workers will be touched in some way.


We are in a mini-respite moment in the economy now, with a bubble made of paper (cash) tossed upon the fire, including bailouts, clunkers, and first time home-buyer one time tax deductions. Our president tells us that it’s a sign of recovery, and has offered during his Asia summit trip that he wants to do whatever it takes to maintain our improvement…


This is certainly a nervous fabrication of the facts at hand by any stretch of the imagination! All projections are for additional peaks in unemployment now.


We are borrowing from future sales of automobiles and homes due to the incentives. These are unsustainable measures and that bubble will burst at that time.


There are now looming double-dips in our economic trend line that will coordinate with the consumer credit card industry, commercial credit availability, the seasonal cash-flow of developers and operators of shopping centers, and housing speculators with adjustable rate short term balloon notes…all coming home to roost!


Hopefully not all at once…


The “not knowing” factor being suffered by us all is fueled in part by an administration that insists on a focus of partisan policy agenda and ideological campaign fulfillment. America is waking up to see that current administration measures have demonstrably not had a focus of jobs, jobs, jobs, and more jobs.


And Americans are currently overwhelmed by the dithering president playing his shell game of rotating agenda items. Focus on Afghanistan, he’s really onto Cap and Trade…


But individual policy initiatives, when taken separately, easily demonstrate a lack of seriousness on the part of the president: We are being told that we must fix our healthcare delivery system because it is too costly, and not a single part of the 2,000 page bill even touches upon costs of tort-reform and the cottage industry of frivolous medical law suits! Even the simple aspect of administration of the new plan is off the table.


The double-speak must end, and hidden agendas must be brought to light.


The “dirty little secrets” of motives – however painful – must be fairly evaluated, as the American people are smarter than their government believes them to be.


People, it’s largely about American faith, trust, and confidence in your own government.


Absent this, a consequence could be:


A next downward step in the economy becoming a “stagflation,” with prices inflating well ahead of any growth in household income, and we would have a flashback to the 1970s that would make disco look like nothing!


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